THE SOCIAL ADEQUACY OF CPF BALANCES TO FINANCE RETIREMENT

Abstract

Singapore is experiencing a period of economic expansion and an increasingly competitive edge. The CPF system is a vital constituent of this success. Its mechanism which enables individuals to be self-reliant in their old age takes the burden (of financing retirees) off the government, allowing it to concentrate on the economy. The fact that the government spends relatively minimal amounts on pensions, allows it to accumulate enormous budget surpluses which contributes to her high level of reserves and thus adds to the faith investors have in Singapore. Moreover, the high savings rate partly due to the CPF savings allows the government a substantial amount of funds to engage in productive investments, The CPF system of Singapore is therefore partly responsible for Singapore's current economic boost that most countries only dream about. This blissfi.11 situation however, may not last. The minimum sum may be insufficient to last anyone through fifteen to twenty-five years of retirement. Sadly, many CPF members do not even meet this minimum sum requirement and thus have to depend on their own alternative sources like savings or family support mechanisms. For those without alternatives, the government is the last resort. This problem is exacerbated by the fact that Singapore is ageing and therefore if reliance is placed on the government for support, there will be strain on the budget, eating into her surpluses and making investors think twice about the prospects of investing in Singapore. The importance of being self-reliant is all the more a necessity with the problem of ageing. Although the government has specified the minimum sum to reach its targeted value of $80 000 in the year 2003, two doubts arc still at large: the capability of the majority of the people in reaching this sum and the adequacy of this new minimum sum to support old age needs. This thesis is set out to evaluate the adequacy of the CPF balances of the present cohort of workers upon their retirement.